Ismail Lagardien: Economics not the answer

There are pointers almost everywhere that globalisation, as we have come to know it over the past three or four decades, a purely economic or financial process, may be in retreat. There is a real danger that this retreat may end the prospects for a more stable, peaceful and prosperous world.

More and more people are accepting that neo-liberal capitalist orthodoxy – the political economic model on which this globalisation has been based – has left us with a world with rising dissent over social injustices, with collapse, and with recurrent conflict and wars. On the back of all of these there is rising consensus that “the once-irresistible forces of globalisation are losing steam” and that the economics basis of late 20th century globalisation ought to be reconsidered.

If this sounds repetitive – it has been a consistent theme in this column – it is because most mainstream economists find it really difficult to believe that they have done anything wrong.

It’s like a tradition I came across in communities beset by organised crime in Sicily, where it is almost impossible to arrest one person for something that everyone in the community does. In local terms, in parts of Sicily, this is referred to as “tutti colpevoli: nessun colpevole” – when everyone is guilty then no-one is guilty.

How did we get here? Well after World War 2, the world was increasingly led to believe that “a rising tide lifts all boats”.

It was implied that economic growth would amount to increased wealth and higher living standards across society. There was some evidence to support this, but there were also arguments and evidence to the contrary.

In the end, the people with money, those who really controlled the world, won the debate.

It is always difficult to make statements or claims when space will not allow the presentation of vast amounts of data or arguments to support one’s claims. I have always insisted, to my students, that making factual statements requires evidence, while theoretical claims require logic, clarity, coherence and plausibility – among others.

Nonetheless, evidence of globalisation’s retreat can be seen in signs that social movements and communities around the globe are finding greater comfort in the perceived certainties of identities: nationalist (Brexit); ethnic or tribal (Burma, Yemen, South Sudan); religious (Muslim, Jewish or Rakhine Buddhist fundamentalism or exceptionalism) or racial (South Africa).

Add to all of these the rise in dissent, mainly among young people, at home and abroad, because of exclusion (especially because of the cost of education), dwindling opportunities (lack of jobs) and the rapidly changing nature of work. Consider, also, mounting evidence of looming secular stagnation (extended periods of low growth) in wealthy countries of Europe and North America, the main drivers and beneficiaries of contemporary globalisation.

In short, then, globalisation as we have come to know it, has made very many people wealthy and very many people poor. It has produced much social stability and uncertainty across the world, and the signs suggest that there is no way out – at least not in our lifetime.

How, then, do we address the multiplicity of crises that we face in the world today? A first step would be to shed the god complex, the belief that economics, as a unified framework for understanding all human behaviour, can provide the answers to all humanity’s problems.

Part of this is bringing non-economists into policy discussion. There’s a reason why we refer to “political economy”.

In these ways we can direct policy towards more effective social policies, greater investment in public goods, clearer focus on social entrepreneurship, more effective corporate governance, a much better regulated financial system, better rights for workers, more progressive taxation and transfer policies, and a return to the idea of the common good as a social reality.

These can be done while restoring faith in a globalisation that is less fixated with corporate and financial integration across borders, necessary as it may seem, than it is with a cosmopolitanism that purposefully undermines the chauvinism of identity politics. It should, also, discourage endless capital accumulation, which I simplify here as the habit of using money to make more money only for the sake of making money.

If this is considered to be unreasonable and idealistic, how idealistic is it to believe that neo-liberal capitalism, which has created recurrent crises, vast inequalities and a crumbling architecture of global capitalism, is the answer to our problems?

I am not comfortable with the ideological moorings of Paul Romer, the new chief economist of the World Bank, but he had a point when he suggested that the problem with mainstream (macro) economics lies within the discipline itself. The discipline, according to Romer, is like a science that has not only stalled for decades, but has actually gone backwards in its ability to understand reality.

I disagree with him, though, that economists can save us from the economic disasters that mark late capitalist globalisation.